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Facts
An addition of ₹15.00 lakh was made to the assessee's income as unexplained investment in a flat purchase, based on information from a search on Acropolis Purple Developers and a statement from its partner. The assessee, being a 1/4th owner, was alleged to have paid on-money of ₹15.00 lakh. The assessee appealed, arguing denial of cross-examination and non-adjudication of legal issues regarding the validity of the assessment proceedings.
Held
The Tribunal, citing a Delhi High Court judgment, restored all legal and factual issues to the CIT(A) for fresh adjudication. The CIT(A) must provide the assessee with an opportunity for cross-examination of the third party whose statement was used, a copy of the material found during the survey, and ensure a reasonable opportunity of hearing.
Key Issues
Validity of the assessment order u/s 147 r.w.s 144B and notice u/s 148 (including lack of DIN and improper jurisdiction u/s 151A); violation of natural justice due to denial of cross-examination and non-provision of third-party statement; incorrect application of Section 69C for unexplained investment.
Sections Cited
147, 144B, 148, 151A, 69C, 133A, 131
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD & SHRI VINAY BHAMORE
आदेश / ORDER
PER DR. MANISH BOARD, ACCOUNTANT MEMBER :
The captioned appeal at the instance of assessee pertaining to A.Y. 2017-18 is directed against the order dated 26.02.2025 framed by National Faceless Appeal Centre (NFAC), Delhi arising out of Assessment Order dated 24.05.2023 passed u/s.147 r.w.s.144B of the Income Tax Act, 1961 (in short ‘the Act’).
Assessee has raised following grounds of appeal :
“The following grounds are taken without prejudice to each other - On facts and in law
1. The Ld.CIT(A) has erred in confirming the action of the Ld. AO making the addition of Rs.15,00,000/- on account of unexplained investment in purchase of the flat merely relying on the information received from the office of DCIT-C-14, Pune and without bringing any cogent evidence on record.
2. The Ld. CIT(A) has erred in dismissing the appeal of the appellant disregarding the contention of the appellant that the Assessment Order passed u/s 147 r.w.s 144B of the Act is bad in law and void ab initio on account of the following reasons:
a. The Ld.AO. has failed to follow the procedure established u/s 144B of the Act. b. The assessment order passed is a gross violation of the principle of natural justice. c. The appellant was not provided with opportunity for cross- examination. d. The notice issued u/s 148 by the Ld. AO dated 29.07.2022 does not contain Document Identification Number(DIN) which is in contravention to the CBDT Circular No. 19/2019 dated 14.08.2019. e. The Ld. JAO erred in assuming the jurisdiction to issue the notice u/s 148 of the Act which is not in accordance with the provisions of section 151A of the Act and the Finance Act, 2021 with regards to National Faceless Assessment Proceeding, Faceless jurisdiction of Income Tax Authorities Scheme, 2022 and Income Escaping Assessment Scheme 2022.
3. The Ld. CIT(A) erred in dismissing the appeal of the appellant without appreciating that the Ld.AO has incorrectly invoked the provisions of Section 69C of the Act which is related to unexplained expenditure. In the present case, the appellant has made investment in the property and has not incurred any expenditure.
The Ld. CIT(A) has erred in dismissing the appeal of the appellant disregarding the submissions made by the appellant that the appellant has not made any cash payment and the payment has been made through DD which were duly reflected in the bank statement.
5. The appellant craves leave to add, alter, amend, or delete any of the above grounds of appeal.
6. The Appellant prays that: a) The Assessment Order u/s 147 r.w.s 144B of the Act may kindly be declared as bad in law and void ab initio. b) The addition made amounting to Rs. 15,00,000/- u/s 69C of the Act may kindly be deleted. c) Any other relief deemed fit by the Hon'ble Tribunal may kindly be granted.”
At the outset, ld. Counsel for the assessee submitted that in the grounds of appeal various legal issues have been raised out of which those which were raised before ld.CIT(A) have not been adjudicated and some legal issues have been raised before this Tribunal for the first time. But so far as merits of the case are concerned the same relates to addition of ₹15.00 lakh on account of unexplained investment in purchase of flat and he submitted that no opportunity of cross examination has been provided nor the copy of statement of the third person which has been used against the assessee has been provided which is a clear violation of principles of natural justice. He however prayed for restoring the issues to the file of ld.CIT(A) for adjudicating the legal issues along with the grounds on merit after providing opportunity of cross examination.
4. On the other hand, ld. Departmental Representative supported the order of ld.CIT(A).
We have heard the rival contentions and perused the record placed before us. We observe that the assessee is an individual and income of ₹4,16,560 declared in the return filed for A.Y. 2017-18. Based on the information arising out of the search carried out u/s.133A of the Act in the case of M/s. Acropolis Purple Developers and the statement recorded u/s.131 of the Act of Mr. Subahukriti Shah, partner of M/s. Acropolis Purple Developers, it emerges that Acropolis Purple Developers has received cash from various flat buyers over and above the sale Agreement value. Assessee is one of the co- purchaser of the flat for which purchase consideration is ₹1.50 crore as per the agreement and on-money of ₹60.00 lakh is alleged to have been paid over and above the agreement value. Assessee being 1/4th owner, ld. Assessing Officer after considering the submissions of the assessee as well as the statement of Mr. Subahukriti Shah recorded u/s.131 of the Act and also information contained in the material found during the course of survey concluded that there is an unexplained investment of ₹15.00 lakh by the assessee in the purchase of flat and made the addition thereof and assessed income at ₹19,16,560. We further note that assessee preferred appeal before ld.CIT(A) but failed to succeed. It is also discernible from the impugned order that various legal issues raised by the assessee challenging the validity of assessment proceedings before ld.CIT(A) remained to be adjudicated. Before us, ld. Counsel for the assessee has stated that apart from the assessee no addition has been made in the hands of other three co-owners and also assessee has not been provided the copy of statement of Mr. Subahukriti Shah recorded u/s.131 of the Act nor any opportunity of cross examination has been provided. We further note that the assessee has raised various other legal issues challenging the validity of notice u/s.148 of the Act including no proper approval u/s.151 of the Act before this Tribunal for the first time.
The issue of Tribunal’s power to adjudicate the ground raised
before it in second appeal which did not pass through first appeal came for consideration before the Hon’ble Delhi High Court in the case of ‘Divine Infracon Pvt. Ltd. Vs PCIT’ [2025, 171 taxmann.com
92. (Del)], wherein their Hon’ble Lordship vide para 13 have categorically held that, the Tribunal has no jurisdiction to proceed to decide the ground which did not arise from the impugned order passed by first appellate authority, irrespective of such ground was raised in first appeal or not.
Considering the prayer made by ld. Counsel for the assessee and in the light of the above judgment, we restore all the legal issues raised in the instant appeal to the file of ld.CIT(A) for necessary adjudication. So far as merits of the case are concerned though the fate of the impugned addition depends upon the legal issues raised by the assessee because in case the assessee succeeds on the legal issues, the impugned addition will be deleted, however, in case, the assessee is not able to succeed on legal issues the ld.CIT(A) before dealing with merits of the case shall provide an opportunity to the assessee for cross examination of the third party on the basis of his statement the impugned addition has been made along with giving the copy of material found during the course of survey. Ld.CIT(A) shall give necessary direction to the ld. Jurisdictional Assessing Officer for carrying out the exercise referred above regarding the merits of the case. Needless to mention that ld.CIT(A) shall afford reasonable opportunity of hearing to the assessee. Assessee is directed to update latest email id and contact detail on ITBA portal. Assessee is also directed to remain vigilant and not to take adjournment unless otherwise required for reasonable cause. Impugned order is set aside and all the grounds of appeal raised by the assessee are allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on this 06th day of January, 2026.